Price at pump jumps as refineries go into “turndown mode”

Edmonton, AB, Canada / 630 CHED Edmonton News
Price at pump jumps as refineries go into “turndown mode”

It is a bittersweet sign spring is once again here.

Gas prices at the pump have jumped about 10 cents overnight Tuesday and now sit at round 122.9 at most stations.

Roger McKnight, a petroleum analyst with EnPro International, isn’t surprised by the jump.

“They affectionately call it in the industry — restoring the market,” explains McKnight. “They’ve reached a point where it was getting well below their wholesale price when you take out all the taxes and they decided enough is enough and somebody let it up and everybody was waiting for somebody to lead and then everybody followed.”

McKnight says for the past 11 of 12 years we’ve seen prices jump at this time and there is good reason for that.

“The refineries are basically in a turndown mode to gear up for making more gasoline for the driving season, which actually starts May 24 Memorial Day weekend and through to Labour Day,” explains McKnight. “So they need a different type of crude to make a higher yield of gasoline, therefore, they have to retweak their refineries.”

He says the turndown mode is essential to produce the fuel needed during the warmer months.

“It has to be done or else we’d all be in trouble,” adds McKnight.

McKnight says refinery levels are at about 85 per cent right now and the inventories of gasoline are below the five year average.

Another big factor is geopolitics and if the Ukraine situation worsens McKnight says we could see higher prices.

“If Putin goes in (to the Ukraine) the price of crude will go up and drag up West Texas Intermediate but if things stay calm, prices should stay calm,” explains McKnight. “There’s a lot of crude being moved by rail now too so that should start lowering crude prices.”

McKnight says another big factor to watch is the price of the dollar.

“Watch out for the Canadian dollar,” explains McKnight. “If the dollar stays down you’ll see the prices stay up because all crude has to be paid for in US dollars.”

McKnight says we likely won’t see another 10 cent jump but we could see the price at the pump go up another five cents by the end of May. (twd)

Photo: Thinkstock photos

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